Rachel Werner, executive director of the Leonard Davis Institute of Health Economics and a professor at the University of Pennsylvania, who was not involved in the study or either investigation, acknowledges growing evidence that private equity ownership leads to consolidated markets, causing loss of competition and increased pricing. But she questions statements, like the ones made by Grassley and Whitehouse, that private equity ownership leaves hospitals in debt and has a negative financial impact on operations, saying that empirical evidence is mixed and that there is no concrete proof to validate claims that these providers are less financially stable or more likely to close.

“In most cases, private equity investment actually improves hospitals’ financial performance, at least in the short run. There's also research showing that hospitals are seeing increasing operating margins stemming from both cutting operating costs and increasing revenue after investments are made by private equity firms,” she told HCB News.

According to Werner, there is evidence to suggest that reductions in staff and services, particularly in less profitable areas such as obstetrics, and switching from outpatient to more lucrative in-patient settings, is how private equity firms improve financial performance. But this does not mean that quality of care is adversely affected, she says.

While some studies indicate that loss of competition does affect quality, there is very limited solid evidence on these effects, either good or bad, according to Werner. The Columbia study found effects on quality to be mixed to harmful, but the impact on health outcomes and operator costs to be inconclusive.

In another study referenced in the Biden-Harris investigation, conducted by the American Antitrust Institute alongside UC Berkeley and UCLA, private equity investments in healthcare rose by over $75 billion between 2010 and 2020, from $41.5 billion to $119.9 billion. For hospitals, certain process-of-care quality measures used in CMS incentive programs improved under private-equity ownership versus non-acquired hospitals, and these providers had higher profits. The authors here also said that higher cost-to-charge ratios are a common proxy for hospital pricing.

But cost-to-charge ratio increases in certain hospitals were not associated with improved quality measures, and those under private equity ownership tended to have lower staff-to-patient ratios and patient satisfaction, though this was cross-sectional. Additionally, due to the lack of available quality measures and hospital-level health outcome measures, as well as conclusive evidence, the authors said that their study may not comprehensively determine the impact of private equity and indicates that such assessments are complex and likely to vary depending on specific factors. There also is no systematic evidence available on the effects of private equity investments in outpatient services.

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